Wednesday, November 21, 2012

The West Lapsing Into Totalitarian Slump

Janet Daley has written a riveting editorial today "We're Headed For Economic Dictatorship" complaining how the economies of The West are stagnated with excessive government intervention. It's the case where the medicine is now worst than the disease. Europe and the UK are much further along the path of totalitarian government malaise than the US. They are broke and their banking systems are completely insolvent. The US is broke, but it's banks are not quite as leveraged as their European peers.

In the US, it's possible that a period of stagnation was inevitable. The US government created the original crisis through excessive credit growth during the past few decades that ultimately reached it's limit. And, regarding private debt, it did indeed reach a limit. If credit is borrowing growth from the future, then the future is already here and now. We had our booming 1980s and 1990s and weaker 2000s. Now comes payback--meaning stagnation or no growth.

It's entirely probable that the very medicine being applied to "help" the economy is actually hurting. Now the government sector is borrowing against future growth by spending vastly beyond it's means and doling out money to as many recipients that it can find. Since the government is not spending on productive things, it's just wasteful and manipulative. Worse, government rule making, rule changing, and renewed regulations leave every businessman sitting on his or her hands waiting in vain for an end to it. No one is smart enough to say "enough!" Unlimited government spending and resources and unlimited free money courtesy of the Fed has enabled all of this "meddling" by "control-freak" nanny-bureaucrats who wrongly think that they know best.

So Government steps in to fill a void in business activity, a void that government itself created by mal-administration and poor policies. So, Gov't ruins the economy, then steps in to control the inevitable decline of the nation's finances and prosperity. Unrest that has already emerged in many countries in Europe is coming to a country near you!

So, in this no growth environment, the politics become all about redistribution of a shrinking pie. No one seems to understand how to grow the pie anymore. Economic illiteracy abounds in the public and in the halls of power. Very few politicians on the Left understand how to create growth. They are too busy crowing about the end of Reaganomics and how tax increases won't hurt the economy even if it's a weak economy. WRONG! They are idiots!

In the absence of growth in the economy....in the long term we can say good-bye to the technological innovations which have been spurred by competitive entrepreneurial activity....and the social mobility that is made possible by increasing the reach of prosperity so that it includes ever-growing numbers of people. In short, almost everything we have come to understand as progress. Farewell to all that. But this is not the end of it. When the economy of a country is dead, and its political life is consumed by artificial mechanisms of forced distribution, its wealth does not remain static: it actually contracts and diminishes in value. If capital cannot grow – if there is no possibility of it growing – it becomes worthless in international exchange. This is what happened to the currencies of the Eastern bloc: they became phony constructs with no value outside their own closed, recycled system.

Democratic socialism with its “soft redistribution” and exponential growth of government spending will have paved the way for the hard redistribution of diminished resources under economic dictatorship. You think this sounds fanciful? It is just the logical conclusion of what will seem like enlightened social policy in a zero-growth society where hardship will need to be minimized by rigorously enforced equality. Then what? The rioting we see now in Italy and Greece – countries that had to have their democratic governments surgically removed in order to impose the uniform levels of poverty that are made necessary by dead economies – will spread throughout the West, and have to be contained by hard-fisted governments with or without democratic mandates. Political parties of all complexions talk of “balanced solutions”, which they think will sound more politically palatable than drastic cuts in public spending: tax rises on “the better-off” (the only people in a position to create real wealth) are put on the moral scale alongside “welfare cuts” on the unproductive.

This is not even a recipe for standing still: tax rises prevent growth and job creation, as well as reducing tax revenue. It is a formula for permanent decline in the private sector and endless austerity in the public one. But reduced government spending accompanied by tax cuts (particularly on employment – what the Americans call “payroll taxes”) could stimulate the growth of new wealth and begin a recovery. Most politicians on the Right understand this. They have about five minutes left to make the argument for it.

When a country is quietly preparing for war, the first signs are usually revealed by a disclosure of armaments. If stockpiling is taking place without a warranted threat present from a legitimate enemy, there is a considerable likelihood of aggression on the part of that nation. America has gone well beyond the psychological process of militarization and has begun the extensive arming of particular agencies whose primary purpose revolves around the domestic.

Now, anyone with any logic would ask who it is that the government is arming itself and local police to fight against? Al Qaeda? Let’s not be naïve…

Don't expect any explanations from the government either. You have a President who refuses to explain the fiasco in Benghazi and hopes the public loses interest---which it probably will. Thus the march to totalitarianism, if true, goes virtually unnoticed and unexplained.

No comments:

Follow by Email

About Me

I have 30 years of international oil and gas project experience but now early-retired. I hold a Bachelors of Chemical Engineering and an MBA in Economics. I have traveled the world widely for work and pleasure and call the US Gulf Coast my home.